Women access financial planning less than men.
Women also earn less than men, accumulate less than men and retire with less than men.
Women live longer than men.
One third of female age pensioners live below the poverty line. It’s expected to get much worse.
Single women who do not own a home suffer the most. They all live below the poverty line.
What’s the problem?
Endemic gender income and wealth accumulation bias. It’s caused by:
- educational decisions and opportunities. Girls study lower income subjects, not maths and sciences, and university women continue the trend, tending to courses aligned with low income occupations
- occupational income bias. Women are paid less for the same work. This is across all industries and professions. Female university graduates earn on average 4% less than males. The gap widens as careers progress. Some say the gap is as much as 18%;over a working lifetime that really hits hard
- greater engagement in unpaid work, greater absences from paid work, due to child bearing and rearing, parent caring and other family responsibilities
- the continuing sex based stereotype within the family that men should be the full time main bread winners and women’s roles are complementary and supportive and
- the irrational phenomena of earlier female retirement, whereby women voluntarily retire with or before their partners despite their significantly longer remaining life expectancies.
What’s the solution?
The solution is not a pink PDS, a glossy photo and an invitation to a cocktail party hosted by a fund manager’s selectively female and un-representively young and attractive PR team, spruiking for more management fees.
Your female clients will be too busy looking after the kids to get there. The child care centre shuts at six.
It’s inadequate nonsense anyway. Financial products cannot bridge the gender gap. The only way to bridge the gender gap is to permanently change female financial behaviour.
You must inform her. Advocate for her. Coach her. Educate her. Trust her. Push her.
This starts with a strict insistence on equal rights in the workplace and all family and personal relationships.
Let her know if she is underpaid. Coach her through a salary increase. Coach her through an up-skilling program. A further education program. Whatever it takes. The easiest way to increase wealth is to earn more in the first place. She cannot save it if she is not paid it. Demand she close the gender pay gap.
Encourage her to start a business. Businesses are the best investments.
Recommend extra super from an early age to compensate for employment gaps; spouse super transfer strategies to equalise super benefits; smarter career choices; active career management; life plans emphasising direct asset acquisition strategies for properties and shares, and smart tax planning.
Include assertiveness training and attitude sharpening. Nil tolerance for gender discrimination, and a preparedness to move on whenever it is encountered.
Conclude with with a preparedness to work harder, smarter and longer so a given physical effort creates a greater financial reward, successful financial husbandry to avoid over-spending (particularly on dependants) and implementing sound and safe long term investment strategies.
It’s frustrating because, to be blunt, it’s not rocket science. It’s just simple compounding. An extra $75 a week every week to super will more than close the super gender gap over a working life. Add an extra $75 a week to rapid home loan repayments and she is well ahead in the wealth accumulation stakes.
But encourage her to do more than this.
Her stakes are high. The future poor are women, particularly single women who do not own a home. Most will be retired for well over thirty years. Retirement near or below the poverty line is not fun. Neither is being homeless at age 80, or even 90. In fact it’s a death sentence.
Your strategies must focus on assertive workplace behaviour to avoid gender underpayment, skills creation and maintenance, home ownership strategies and super, as much as possible as young as possible. Health management is critical: staying employed in the greying years is critical to the economics of retirement. And you need to be healthy to work.
Discourage early retirement. It’s not a good idea. A woman retiring at age 55 probably faces 35 years of retirement. Working part time for an extra ten, or even fifteen years is critical. She adds more to her capital, draws down less capital and, once fully retired, has to fund 15 fewer years of true retirement. Those last 15 years make a huge difference to the economics of her ultimate retirement.
The big thing is financial planning education. Educate all your clients, but particularly educate your female clients. They need it more. They are otherwise destined to earn less, live longer and die poorer. Your female clients have a heightened need for financial planning advice and action at all stages of their lives.
Buy her books. E-mail relevant press articles. Paint pictures, tell stories. Get into her head. She has to do more, sooner, for longer. Make sure she knows what she has to do. And what happens if she does not.
Women tend to be more risk averse than men, and this plays out in their investment strategies. They skew to the conservative, so in the long run their investments compound slower than average. Female clients should invest more assertively, less conservatively, better tolerating risk, and achieving better long term results. Encourage your female clients to stay fully exposed to growth assets. Age 60 is not a good time to go conservative and defensive. Thirty years out of the markets means she will end up in poor. Think about what happened to any woman who did this in 1987: she missed out on an average compounding rate of growth of nearly 10% every year for 30 years.
Virginia Woolf wrote A Room of One’s Own in 1928. If she could posthumously reprise it I bet she would call it “A Positively Geared Share Portfolio of One’s Own”, and include a new eighth chapter on the need for women to become financially independent to be socially independent and relationship independent. And equal. And negatively geared.
Suffragettes need super. And financial planners.
She must own her own home
Australian property has averaged more than 10% year for the last twenty years.
Home owners are significantly wealthier than non-home owners.
Make sure your female clients own as much home as possible as young as possible and let time do the rest.
Anecdotes are dangerous, but I must note the average cost of a wedding is about $40,000. Most brides do not have $40,000 in super. They just blew half their deposit on one big night out.
Bernard Salt got it wrong. It’s not the smashed avocado. It’s the wedding cake. And the child care costs.
And if she is single it’s even more important she own her own home. Sydney and Melbourne rents on one bedroom apartments are more than half the old age pension. Renting means living in poverty.
Your statement of advice must feature her home ownership plan.
Health and wealth
Female health management is critical. A woman cannot work longer and harder if her body and mind won’t take it. A woman in her fifties should consult her GP for an active health management plans designed to keep her working, at a pace and in a space she controls and enjoys, well into her sixties and even her seventies.
Workplace longevity is the key to long term financial security.
Workplace longevity helps with mental health too. GP health plans include Medicare funded psychology services. Psychologists bulk bill. Refer your clients to mental health experts where needed. It’s free.
Interested in learning more?
You can read an excellent article by Catherine Robson on the value of educating female clients here: How a financial planner saved Book Club host Jennifer Byrne’s life.
Interested in learning more about women and financial planning? Educating your female clients? Getting a better handle on the phenomena of women in financial planning? These documents will repay reading:
- In 2015 the ANZ released the “ANZ Women’s Report Barriers to Achieving Financial Gender Equity”. You can download this report here: ANZ Women’s Report Barriers to Achieving Financial Gender Equity.
- In 2012 The Australian Institute of Superannuation Trustees published “Super-Poor But Surviving. Experiences of Australian Women in Retirement” and it seems even more relevant in 2017. You can download this report here: Super poor but surviving.
The next step
Send this article on to your female clients and invite them in for a meeting to discuss what they should be doing now to make sure they are fiercely financially independent in later life.
Ask your clients to pass it on to friends and family, with an invitation to contact you for specific help and advice. Don’t charge for that first meeting. Never let a fee note get in the way of a thirty year relationship.